With funding plans announced today Europa Oil & Gas (LON:EOG) is setting itself up for success, says chief executive Hugh Mackay.
Europa aims to raise £3.4mln through a share sale, with £1.4mln already secured through a conditional institutional placing. Existing shareholders now have the opportunity to subscribe for a total £2mln worth of additional new shares.
New shares will be issued at 6p each, a 20% discount to Friday’s closing price.
Mackay in an interview with Proactive Investors acknowledged criticism of the funding terms from some investors.
“To be honest, I don’t like the price either,” he said.
“But, at the end of the day, we do need to raise the money. The market was only prepared to support 6p, which I’m not happy about, but we have to proceed with it.
“What we can say to investors is that all qualifying investors can buy shares at 6p, and excess contributions are allowed, so, basically, you can apply for as many shares as you want and, provided we don’t exceed the £2mln cap, you won’t get diluted.
“So, whilst you may not like the price, you do have the opportunity to invest on exactly the same terms as the institutions.”
In the past, when oil was worth US$100 per barrel, Europa was able to cover all of its overheads, but now with lower crude prices the current production base covers around 90% of the company’s costs.
As well as covering the remaining overheads, Europa has also earmarked funds for Europa’s share of start-up costs at the Wressle field, onshore UK.
“What we’re trying to do now is prepare for success for various activities over the next six months, one of which is Wressle.
“We’re doing an extended well test there, and if all that goes well I hope we will be preparing to get it [the field] into production, with a view to having it online in the first half of 2016.”
Europa also hopes to secure more new projects, through licence applications in the UK and Ireland.
In the UK it has applied for three licences, and in Ireland, where the current round closes in September, Europa is going to make a number of applications. It is hoped that decisions will be announced by the Irish authorities also in the first half of next year.
Europa’s existing Irish exploration projects may also see progress sometime after the bidding round closes, as partner Kosmos will pursue a farm-out to a third-party and hopefully confirm its plans for future drilling.
Mackay says that seismic work and exploration to date has given Europa an edge in the process, and he reckons the pending licensing round will likely be the last chance for smaller companies to get a piece of Ireland’s offshore oil industry.